It's hardly breaking news at this point, but it bears repeating: Small-cap stocks are your best bet for superior returns. After all, small-cap stocks have trounced their larger brethren over the past 80 years -- and over the past three decades, the competition hasn't even been close:

Annualized Return

Small Caps

Large Caps

1926 to 2006

12.7%

10.4%

1976 to 2006

17.5%

12.8%

Data from Ibbotson Associates.

Meanwhile, a recent study by Jeff Anderson and Gary Smith from Pomona College shows that America's most admired companies also have a tendency to beat the market. Anderson and Smith analyzed the returns of Fortune's list of the 10 most admired companies from 1983 to 2004. They found that a portfolio of these stocks outperformed the S&P 500 by "a substantial and statistically significant margin."

By the power of the transitive property
So it stands to reason:

A. If investing in small-cap stocks generates market-beating returns, and ...
B. If investing in the market's best companies generates market-beating returns ...
C. Then investing in the market's best small-cap companies should generate market-annihilatingreturns.

If only there were a list of the best small-cap companies ...
Fortunately, the folks over at Forbesmagazine compile an annual list of the 200 best small companies in America. According to Forbes, companies "must pass through a gauntlet to qualify for the list," so you know you're getting the cream of the crop.

To make Forbes' list, a company must have revenue between $5 million and $750 million, and a share price higher than $5. It must also clear certain thresholds for returns on equity, sales, and income.

That's some list
As you might expect, Forbes' list boasts some impressive names, and more than a few familiar faces. The list successfully identified small-cap stalwarts such as Hansen Natural (Nasdaq: HANS), Quality Systems (Nasdaq: QSII), and Shuffle Master (Nasdaq: SHFL) long before they emerged from the pack.

Forbeswas also early to the party on success stories such as Atwood Oceanics (NYSE: ATW), Ceradyne (Nasdaq: CRDN), and Cognizant Technology Solutions (Nasdaq: CTSH). Look at the returns:

Company

First Appeared on the ForbesList

Return Since First Appearance*

Atwood Oceanics

Sept. 28, 2001

507%

Ceradyne

Sept. 25, 2003

68%

Cognizant

Oct. 1, 1999

3,093%

Hansen Natural Continued...